While Americans are already driving 11 billion fewer miles than they did last year, a decline of 4.3%, they still drive today about 30% more than they did before the OPEC oil shocks. The elasticity of driving to gasoline prices is estimated to be around the 0.06. That means a 10% rise in gasoline prices will eventually lead to a 0.6% reduction in miles driven. Using that rule of thumb, the 280% cumulative rise in gasoline prices between 2004 and our target $7 per gallon target price should induce more than 15% reduction in miles driven on American roads.

At a minimum, once the worst of the housing shock passes, the Fed will be forced to raise real interest rates back to zero in order to prevent an improving economy from allowing wages and other prices to catch up to oil. With CPI trending at an energy- and food-driven 4%, that will entail 200 basis points in tightening to get to a 4% funds rate by the end of next year. As a result of our upward revised call for both oil and interest rates, we’ve chopped our US growth forecast for 2009 from just over 2% as of two months ago, to little over 1%, no better than this year’s housing-blunted performance. The US economy has managed to avoid feeling the full brunt of oil prices over the last few years, but 2009 will be the year that its luck runs out

Russia’s Yuzhno-Khylchuyuskoye “YK” for July 2008 start to get 150,000 bpd in 2009Russia’s Vankorskoye for October 2008 to get 420,000 bpd peaking in 2017Brazil Marlim Sul Mod 2 P-51 for August 2008 to get 180,000 bpdBrazil Marlim Leste P-53 for August 2008 to get 180,000 bpdBrazil Marlim Leste (FPSO Cidade de Niteroi) Dec 2008 for 100,000 bpdCanada’s Horizon Oil Sands Project (Phase I) for Sept 2008 start to get 110,000 bpd